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Home  »  SA Mining   »   Africa’s Resource Curse Manifests in Many Ways – New Report

Africa’s Resource Curse Manifests in Many Ways – New Report

By Brindaveni Naidoo.

The paradox of plenty continues to afflict many of Africa’s resource-rich countries, whereby they perform worse than resource-poor countries.
Every country in Africa should develop its own corporate governance framework. Every country in Africa should develop its own corporate governance framework.

This is according to the United Nations Economic Commission for Africa’s (UNECA’s) fourth African Governance Report, entitled Measuring corruption in Africa: The international dimension matters.

The report states that good governance is a fundamental requisite to successfully achieve sustainable structural transformation, and that it was especially the case for Africa, where 38 out of 54 countries are natural-resource rich, depend on them for their income, and have, for the most part, been experiencing the resource curse.

“The resource curse manifests itself in different ways, including so-called Dutch disease and frequent boom and bust cycles due to revenue volatility. It also undermines both economic and political governance and can even trigger socio-political strife (e.g. blood diamonds in Liberia).”

Lynette Chen, the CEO of NBF said at the African Corporate Governance Summit, in Maputo explained that Africa is home to at least seven emerging markets, and is now one of the world’s leading investment destinations. “Our main challenge is improving investor confidence and the best way to solve this challenge is by dealing with the softer issue of governance. It is my view that sustainable economic growth and development is heavily dependent on good political and corporate governance, as this impacts the investment risk levels of African countries.”

Also during the summit, in February, the African Corporate Governance Network (ACGN) launched the first edition of a report titled The State of Corporate Governance in Africa: An Overview of 13 African Countries”.

The ACGN-EY report contains a high-level overview of the current state of corporate governance frameworks and systems in 13 countries, which include Egypt, Ghana, Kenya, Malawi, Mauritius, Mozambique, Nigeria, South Africa, Tanzania, Tunisia, Uganda, Zambia and Zimbabwe.

 Mervyn King, an ACGN ambassador and chair of the International Integrated Reporting Council, states in the report that every country has its own particular circumstances and challenges.

“Consequently it is important for every country to develop its own corporate governance framework. This notwithstanding, the basic principles of corporate governance are equally applicable to both public and private entities in every country.” King adds that “quality governance attracts investment.”

The Nedbank Group and the NEPAD Business Foundation (NBF) launched the report in South Africa at the Nedbank-NBF Networking Forum in May, in Sandton.

But the UNECA report adds that, generally, African countries have made good progress towards improving the continent’s natural resource governance trajectory.

“At present, 17 African countries have been designated as compliant with the Extractive Industries Transparency Initiative, while 18 countries meet the minimum requirements of the Kimberly Process Certification Scheme. Twenty-six African countries have signed up to the Publish What You Pay initiative.

“In addition, in order to promote transparency and accountability, the continent has strived to establish specific frameworks for natural resources management,” the report highlights.

These include the African Union’s Declaration on Land Issues and Challenges in Africa, the Voluntary Guidelines on the Responsible Governance of Tenure and the Africa Mining Vision.

However, the African Governance Report indicates that, even with these milestones, implementation gaps are a major hurdle to Africa’s natural resources governance.

“These gaps should be examined because natural resources (including minerals) provide a significant potential for revenue generation, which is needed in order for the continent to carry out the structural transformation agenda.

“In 2011, resource-based and semi-processed goods accounted for about 80% of African export products. Africa’s comparative advantage in natural resources can therefore form the basis by which structural transformation can be sustained on the continent.”

The report points out that, however, putting in place the right governance framework is a critical precondition to harnessing Africa’s natural resources for transformation. “In addition, countries are party to several governance initiatives, both regionally and internationally.” This includes the African Peer Review Mechanism, which is an African-created and owned initiative that aims at improving governance in all African countries.

Meanwhile, the report states that effective economic governance institutions are essential, not only for combating corruption, but also for structural transformation and inclusive development in Africa.

“The current predominantly perception- based measures of corruption are flawed and fail to provide a credible assessment of the dimensions of the problem of corruption in Africa. They focus on country ranking (“naming and shaming”) and as such do not provide useful policy insights and practical recommendations to inform policy and institutional reforms to help African countries to stem corruption.

“Alternative non-perception-based methods of measuring corruption remain inadequately developed and also ignore the international dimension of corruption in Africa.”

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